Question

Carter Industries has two divisions: the West Division and the East Division. Information relating to the divisions for the year just ended is as follows:

West East
Units produced and sold 50,000 39,000
Selling price per unit $ 10 $ 17
Variable costs per unit 6 7
Direct fixed cost 68,000 130,000
Common fixed cost 60,000 60,000

Common fixed expenses have been allocated equally to each of the two divisions. Carter's segment margin for the West Division is:

A. $200,000.

B. $132,000.

C. $50,000.

D. $140,000.

Answer 1

Carter's segment margin for the West Division is: $132,000

Step-by-step explanation:

Hint : Include items that are controllable only by West Division

Calculation of Carter's segment margin for the West Division

Sales (50,000 × $ 10) 500,000

Less Variable Costs (50,000 × $ 6) (300,000)

Controllable Contribution 200,000

Less Controllable Fixed Costs:

Direct Fixed Cost (68,000)

Division Margin 132,000